Once-Coveted Asian Oil Riches Take Backseat to U.S. Shale

Once captivated by Asia’s untapped oil-and-gas riches, some midsize U.S. energy producers are now selling their Asian assets as the North American shale revolution offers bright prospects closer to home.

Companies such as Anadarko Petroleum Corp Hess Corp. and Newfield Exploration Co. recently started looking for buyers for either all or some of their Asian portfolios, together worth billions of dollars. Assets for sale include oil fields in China’s Bohai Bay and natural-gas hubs in Thailand.

Pulling back from Asia may appear counterintuitive. China’s energy demand alone will rise by 60% between 2010 and 2035, accounting for the largest share of growth in global energy use, according to the International Energy Agency.

But oil-and-gas producers now face more choices about where to drill. New technology that enables access to oil and natural gas trapped in dense rock formations is transforming global energy markets. The U.S. is expected to become the world’s top oil producer by 2017, the IEA said last year. And oil and gas extracted from shale is expected to account for around one-third of U.S. output by 2020, according to PFC Energy, a Washington-based consultancy.

With oil prices still relatively high amid declines in other commodities, the prospect of surging output in the U.S. is proving attractive to producers.

“We believe that now is the right time to become a North American-focused operator,” Newfield told investors in a statement this year.

Goldman Sachs is advising Newfield on the sale of its Asian assets, including stakes in both producing and prospective oil-and-gas fields offshore of Malaysia and China. A document sent to prospective investors said the Asian assets had operating earnings of US$657 million last year.

Newfield, based in Texas, hopes to receive final offers by the end of September. A spokesman for the company confirmed a sale was in progress, but declined to elaborate.

Anadarko has hired Jefferies to advise it on the sale of interests of up to 40% in shallow-water oil fields in Bohai Bay, about 80 kilometers off the coast of northeastern China, according to a sale document seen by The Wall Street Journal. Anadarko’s share of the assets, which are operated by China’s Cnooc Ltd., produce around 9,000 barrels of oil a day and include several prospects that may contain more oil.

Houston-based representatives for Anadarko weren’t available for comment Wednesday.

Goldman Sachs is also helping Hess sell assets such as its 75% interest in the Ujang Pangkah project offshore Indonesia, which produces natural gas and condensate, a type of light oil.

A New York-based spokesman for Hess confirmed the company is selling all of its assets in Indonesia and Thailand, including stakes of up to 35% in offshore and onshore blocks. He declined to elaborate.

All three companies operate large oil and natural-gas fields in the U.S., and have several undeveloped prospects.

Newfield produces around three-quarters of its oil and natural gas in the U.S., and said in a statement in February that it sees its output there growing by as much as 43% through 2015.

Some see risks in the strategy.

One is that rising U.S. oil production could weigh on prices, hurting profitability. Companies will be mindful of what followed the shale-gas boom: sharp falls in domestic prices that led many producers to book multibillion-dollar asset write-downs.

Andrew Williams, a Melbourne-based analyst at RBC Capital Markets, said a trend of U.S. companies selling assets is undoubtedly emerging. But he said factors other than shale oil’s potential may be playing a part.

Anadarko, for example, has enjoyed so much exploration success in other parts of the world that it needs to sell some fringe assets to re-direct capital to bigger projects.

Meanwhile, Hess is under pressure to unload assets after activist investors, frustrated by a string of dry holes and poor share-price performance, forced the ouster of former chairman John Hess this year and called for a renewed focus on the U.S.